Refinancing a home is a big process, one that can take a lot of time. In order to get the most from your refinance you want to get low refinance rates, and to do this you need to be very aware of everything that is going on during the process. This means that you need to be willing to put in the time necessary in order to get the outcome you desire. Yes it is time consuming to do your homework and be involved, but the financial outcome is worth the time. Here are a few things you can do that may save you money in the end.
Plan Ahead – Prepare Your Home for Appraisal
The process for a refinance starts long before you actually approach a lender for a quote; it starts when you decide you want to refinance. As soon as you make the decision you will want to prepare your home and finances for the appraisal and lender scrutiny that they’re going to undergo. There is a reason for this. First, you want the home to appraise for as much as it can. So if there are things that need to be repaired or touched up, do so as it may give a better impression to the appraiser. Second, your finances. Like the home they’re going to be appraised. If you have blips on your credit and debt that you could have paid off but didn’t, you will see the effects of that on your credit score, which will absolutely affect whether low refinance rates are yours, or whether you’ll be paying a higher price. So be sure to do as much as you can on your credit before you ever approach the bank for a refinance.
While you’re preparing your home and finances, do some research on the homes that are selling in the same area as yours. A common mistake homeowners make is to assume that the home is worth more than it actually is. They go in for a refinance and are hit with a bit of a blow. You won’t know the exact value until the appraiser shares the results, but you can get a pretty good idea of the value if you compare your home to similar homes on the street.
Lender Offered Low Refinance Rates
Once you’ve prepared your home and finances you’ll have to contact some lenders. Don’t just contact the current lender you have and stick with them. Get quotes from multiple lenders, preferably within a day or two of each other, and compare the quotes to each other. Your original lender may have the best offer and he may not. By comparing quotes you’ll be able to go with the lender that is willing to give you the best rate. Also, some lenders are willing to negotiate in order to keep your business so don’t rule out negotiating when it comes to some of those fees you’ll be slapped with.
While determining the lender you’ll also want to look into the details of the refinance. Oftentimes you can get low refinance rates by adjusting some of the terms of the loan or by making up front payments in addition to the down payment. So keep these in mind. It’s not uncommon for a 15 year loan to have a lower interest rate than a 30 year loan, although the payment will be bigger. This method can save money, but you’ll want to pull up a refinance calculator to determine whether or not the savings will be worth it.
In addition to the loan term you also have closing costs and points (a point is a certain amount paid up front that reduces the amount of interest required). Typical refinances require thousands to be paid out in closing. If you pay these up front you are often given a slightly reduced interest rate. Some homeowner prefer paying them over time, and they’re willing to be the higher rate. However, if you can pay the costs up front and pay additional points, you can often reduce the rate. While you’re dealing with closing costs, be sure to focus on the details of the costs. Oftentimes there are fees that can be waived or reduced so really watch the bottom line.
There are many different types of refinances and many different ways to secure a low rate. These are some of the most common methods and they’re typically recommended by those who handle these situations professionally. As a homeowner you would be wise to partner with a good loan officer and have the two of you work together to secure the lowest rate possible.